Tokenize Your Shares

The new way to raise capital & manage shares. Compliant, fast & digital.

Why tokenize your shares?

Initial Coin Offerings (ICOs) have shown the potential to revolutionize traditional forms of fund raising, such as Venture Capital and Initial Public Offerings. However, ICOs have a major flaw: They do not convey any enforceable rights to tokenholders. Investors began to notice, and ICO funding dropped significantly.

Tokenized shares combine the strengths of ICOs and traditional shares:

Enforceable rights

Tokenholders are shareholders with enforceable dividend and voting rights.

Quick and low-cost process

The entire process can be done in weeks. No FINMA no-action letter or tax ruling required.

Easy transferability

The transfer of the token transfers the share. No burdensome digital (or even wet) signature required.

How it works

The tokenization of your shares requires three layers.

Legal foundation

Amendment of the articles of association, board member resolution on the share token terms, investor documentation.

Smart contract

On-chain issuance of tokens on the Ethereum blockchain, declare loss functionality, connection with the share register.

Tokenized equity constitutes a framework where each token represents a share in the underlying company.

It represents a legal relationship in which the holders of tokens are endowed with enforceable rights (voting and/or dividend rights) by holding the corresponding tokens. Tokenized shares thus bridge the gap between the existing law doctrineand the progressive blockchain technology.

Tokenholders are de jure shareholders of the underlying company, which implies that a token represents a share in the company (while the principle remains unchanged, this legal relationship may also be governed by a different exchange relation, i.e. one token represents two shares), hence tokenized equity. Holders of tokens are endowed with enforceable rights, that is, voting and dividend rights, by holding the corresponding tokens.

Why tokenized shares and not tokenized equity? Many publications and articles predominantly use the term tokenized equity, however, strictly speaking this is not entirely correct. Since the term shareholder’s equity commonly refers to a company’s net amount of total assets and total liabilities listed on the balance sheet. In the tokenization process, only the share capital, which is part of the shareholders equity, gets tokenized. Given its common use, we will henceforth refer to the framework as Tokenized Equity and to the ownership in the company as share.

Token Ownership in a blockchain project. Not associated with enforceable capital rights (dividends) and voting rights (although the former and latter may be contractually agreed upon, they are not binding and their materialisation at discretion of the board of directors of the company in ownership of the project).

In essence, registered share tokens qualify as uncertified securities (as defined by Art. 973c CO or extra-legal). Given uncertified securities are pure obligatory rights, in principle, this allows for an application of the common rules of the Swiss Code of Obligations (as opposed to the law on securities). Therefore, this makes possible both the integration of tokens into shares and the transfer of these tokens.

From a legal perspective, the solution of fully tokenized equity is quite comprehensive:

First, the legal qualification of share tokens needs to be considered. These tokens qualify as uncertified securities. These securities confer only civil law rights and no financial market laws are being touched.

Second, the connection between tokens and shares needs to be established. This causes a restriction on the power of disposition since the tokens need to be transferred in order to transfer the rights associated with the shares. This restriction needs to be empowered in the (Eidgenössisches Amt für das Handelsregister (EHRA)-approved) bylaws.

Third, the transfer of the tokens itself is regulated in the sense of uncertified securities. The corporation gives implicit approval of the transfer of tokens, which takes place without specific form requirements and this enables the transfer of rights.

What is important to note here, is that the shares are legally bound to the tokens. Thus, transferring the token is similar to handing over a physical share certificate: the possession of the share is transferred along with it.

Once in possession of said tokens, the buyer must register himself with his real name in the shareholder registry of the company, which is a legal duty. Without registration, the shareholder is neither entitled to receive dividends nor can he/she make use of his/her voting rights (but he/she can still sell the share to a next shareholder).

Each share is represented by a token on a blockchain and transferring shares is accomplished by transferring the token directly. In this sense, the token really replaces a physical (paper) share.

Smart Contract

A smart contract is a computer program that runs on a decentralized network. This means that every node on the network (for example a miner of Ethereum) runs a copy of the code locally. In a healthy network, no single player can make malicious changes unanimously.

ERC20

A common use case of smart contracts is keeping track of assets. Concretely, the smart contract contains mapping of owners and assets. The ERC20 standard defines a specific implementation of this idea.

Transaction monitoring

Due to the pseudonymous nature of most blockchains, owners must register with the company in order to exercise their full shareholder rights. The company can now monitortransactions happening on the blockchain and updatethe shareholder registry accordingly – this process can be fully automated.

It is important to note that shares can be transferred on the blockchain freely, even if none of the counterparties are registered. However, until the buyer registers with the company, they will not be able to exercise their shareholder rights.

Dealing with lost private keys

Tokenized shares are held on accounts which can only be accessed with the correct cryptographic key. While systems exist that facilitate handling of keys, a situation where a private key is lost can still occur which means that the corresponding shares can never be transferred again.

To mitigate this risk, the company can decide to maintain a degree of central control over the shares (thus moving away slightly from the decentralized character). If this is not desired, the smart contract can be implemented in such a fashion that users can claim “lost” shares back after staking a collateral which will be lost in case of a malicious claim.

Utility Tokens, Security Tokens, and Tokenized Equity share the fundamental aim of enabling investors to participate in a company’s growth and success. However, there are certain key differences with respect to how this is achieved, and which legal claims are involved.

The Tokenized Equity framework equates shareholders and (security) tokenholders, thus endowing them with enforceablerights, i.e. claims, on the underlying company.

Utility tokenholders are not endowed with any enforceable claims on the underlying company.

As the term suggest, the utility of holding the token is derived from its usability in a particular ecosystem.

Capital gains for tokenholders only result from an increase in the token demand and a corresponding increase in the token price.

Within the Tokenized Equity framework, each (security) token de jure represents a registered share in the underlying company. Not only does this simplify the whole dividend and voting process considerably, but also guarantees that share (= token) prices fundamentally correlate with the enterprise value.

Security tokenholders are not endowed with any enforceable claims on the underlying company.

In many cases the underlying companies set up contractual dividend and voting agreements, however, the latter are not enforceable.

If shares (of the underlying company) and security tokens coexist, the distribution of dividends to tokenholders is at the discretion of the shareholders (general assembly).

If shares and security tokens coexist, the voting on agenda items is at the discretion of the board of directors of the underlying company, non-binding and not mandatory by law. Therefore, the board of directors can vote on a proposal for an online assembly of tokenholders but is not obliged to do so.

If shares and security tokens coexist, there is no implicit (fundamental) correlation of the token price and the enterprise value.

The framework of Tokenized Equity merges the legal domains of shares and tokens to create a unified framework where tokenholders are de jure shareholders, enhancing tradability of shares, reducing transaction costs, and facilitating valuations.

Equity of startups and small and medium-sized enterprises is not easily tradable as those companies have no access to an exchange market for their shares. Thus, the so-called liquidity premium (up to 25%) cannot be unlocked in a traditional Equity framework.

In its current form, the legal framework of tokenized equity has been designed and tailored specifically to the Swiss legal system. However, the application in other jurisdictions, where certain legal aspects are given, should theoretically be possible.

Tokenized equity is taxed in the same way as normal shares are. In Switzerland, this implies that capital gains are tax-free for natural persons, but dividends are subject to income tax. Furthermore, wealth tax is owed on the share capital.

Disclaimer

This is the only official Alethena Website (https://www.alethena.com/). The information contained in this website describes the Alethena project of Equility AG.

The information contained in this webpage does neither constitute an offer to buy or to subscribe for Alethena Tokens of Equility AG nor a prospectus within the meaning of applicable Swiss law (i.e. Art. 652a of the Swiss Code of Obligations). Moreover, the information contained on this website shall not constitute an offer to sell or the solicitation of an offer to buy Alethena Tokens, in any jurisdiction in which such offer or solicitation would be unlawful prior to registration, exemption from registration or qualification under the securities laws of any jurisdiction.

No offering or sale of Alethena Tokens in the Unites States or to US Persons
Neither Equility AG, nor any of its subsidiaries or any affiliates, nor any person acting on any of their behalf has made or will make offers or sales of any securities under circumstances that would require the registration of the offer or sale of any of the Alethena Tokens under the US Securities Act. The Alethena Tokens have not been registered or qualified under any state securities or "Blue Sky" laws of the United States. Neither Equility AG, nor any of its subsidiaries or any affiliates, nor any person acting on behalf of any such persons has offered or sold, and will not offer or sell, any Alethena Tokens within the United States and to residents of the United States. Accordingly, neither Equility AG, its subsidiaries or any affiliates, nor any person acting on behalf of such per-sons have engaged or will engage in any directed selling efforts with respect to Alethena Tokens within the Unit-ed States and to residents of the United States. Neither the Company, its subsidiaries or any affiliates nor any person acting on its or their behalf has entered or will enter into any contractual arrangement with respect to the distribution of Alethena Tokens in the United States and to residents of the United States.

Equility AG has published an Information Memorandum on their website. The sole basis on which possible future investors should make their decision to buy or to subscribe to Alethena Tokens of Equility AG shall constitute the official Information Memorandum published on the Alethena Website. Possible future investors are furthermore advised to consult their bank or financial adviser before making any investment decision.

Potential future investors should note that participation in the future Alethena Token Offering will be subject to limitations imposed by applicable securities laws in various jurisdictions. These are outlined in more detail in the official Information Memorandum published on the Alethena Website.

This website may contain specific forward-looking statements, e.g. statements including terms like "believe", "assume", "expect", "forecast", "project", "may", "could", "might", "will", or similar expressions. Such forward-looking statements are subject to known and unknown risks, uncertainties, and other factors which may result in a substantial divergence between the actual results, financial situation, development, or performance of Equility AG and/or the Alethena project and those explicitly or implicitly presumed in these statements. Against the background of these uncertainties, readers should not rely on forward-looking statements. Equility AG assumes no responsibility to update forward-looking statements or to adapt them to future events or developments.

I confirm that I am seeking information on the Alethena project on my own initiative after having read and understood the above.